Under what circumstances is the franchisee NOT required to indemnify Chicken Guy and its Indemnitees?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and all guarantors of Franchisee's obligations under this Agreement shall, at all times, indemnify, defend (with counsel reasonably acceptable to Chicken Guy), and hold harmless (to the fullest extent permitted by law) Chicken Guy and its affiliates, and their respective successors, assigns, past and present stockholders, directors, officers, employees, agents and representatives (collectively "Indemnitees") from and against all "losses and expenses" (as defined below) incurred in connection with any action, suit, proceeding, claim, demand, investigation, inquiry (formal or informal), judgment or appeal thereof by or against Indemnitees or any settlement thereof (whether or not a formal proceeding or action had been instituted), arising out of or resulting from or connected with Franchisee's (or its employees') operation of the Franchised Restaurant and Franchisee's (or its employees') activities under this Agreement, excluding the gross negligence or willful misconduct of any Indemnitee. Franchisee promptly shall give Chicken Guy written notice of any such action, suit, proceeding, claim, demand, inquiry or investigation filed or instituted against Franchisee and, upon request, shall furnish Chicken Guy with copies of any documents from such matters as Chicken Guy may request.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the franchisee is generally required to indemnify Chicken Guy and its Indemnitees against losses and expenses arising from the franchisee's operation of the franchised restaurant. However, this indemnification requirement does not apply in cases of gross negligence or willful misconduct on the part of any Indemnitee. This means that if Chicken Guy or its affiliates, employees, etc., are grossly negligent or engage in willful misconduct, the franchisee is not obligated to cover their losses and expenses.
This exception protects the franchisee from liability for damages or losses directly caused by the franchisor's own egregious actions. It is a fairly standard clause in franchise agreements, as it prevents the franchisor from shifting responsibility for its own misconduct onto the franchisee. However, the franchisee bears the burden of proving that the gross negligence or willful misconduct occurred.
The definition of "Indemnitees" is broad, encompassing Chicken Guy, its affiliates, and their respective successors, assigns, past and present stockholders, directors, officers, employees, agents, and representatives. The franchisee is responsible for providing written notice to Chicken Guy of any action, suit, proceeding, claim, demand, inquiry, or investigation filed against them and must furnish copies of relevant documents upon request.
Chicken Guy retains the right, but not the obligation, to assume the defense and/or settlement of any action subject to indemnification, without diminishing the franchisee's indemnification obligations. Chicken Guy is not obligated to seek recoveries from third parties or mitigate losses. This clause highlights the importance of understanding the scope of indemnification and the potential financial responsibility a franchisee assumes when operating a Chicken Guy franchise.